The Real Estate (Regulation and Development) Act (RERA), which will come into effect on May 1 and promises to safeguard the interests of homebuyers will also have a side effect: It is likely to prolong the slowdown currently experienced in the real estate market. At least in the short term.
The reason — it will take months for builders to shift to this regime as various mandatory requirements like registering themselves with the housing regulatory authority, getting approvals, various disclosures and then finally launching the projects will consume time.
According to CBRE, the real estate consultancy firm, new launches will be affected by RERA. “The realty market will be slow, as builders will take time to adopt to the RERA rules and hence we will hardly see any launches in the next few months,” said Anshuman Magazine, chairman, India and South East Asia, CBRE. He said the current scenario was one of the longest slowdowns being experienced by the realty sector.
“However, RERA in the long run will only bring transparency and infuse more funds into the realty sector, apart from throwing out fly-by-night builders,” he added.
Builders, too, have decided to postpone their new launches keeping RERA in mind. “It was a better option to launch an RERA compliant project rather than first launch and then stop it midway to adhere to RERA rules,” said Bhavesh Sanghrajka, managing director, Shraddha Lifescapes.
In the RERA Act, all projects — new as well as under-construction ones which have not got the Occupation Certificate (OC), fall under its ambit.
The Maharashtra government notified the RERA act, which provided for its implementation from May 1. RERA was introduced to protect the interests of homebuyers and drive out unscrupulous builders from the realty market.
This act protects the interests of homebuyers by penalising builders for delays in the projects, and also mandates that the builder has to provide quarterly reports of the progress of the project. In addition, it mandates that the builder keep 70 % of the amount collected in a separate account and disallows any diversion of funds to other projects.
Since the last few years, the realty market has been going through a massive slowdown, and demonetisation only aggravated matters further.